The vicious cycle of violence, death and looting that erupted in South Africa on Friday continued for a fifth day yesterday, compounding already contracted regional economic performance in the face of a devastating global pandemic.
Sure to have debilitating consequences for the domestic economy due to Namibia and the region’s strong reliance on South Africa as southern Africa’s industrial powerhouse, the production stoppages in that country are expected to be instantly felt by local consumers, as soldiers were dispatched on the streets to help quell the violence.
Mally Likukela, local economist and MD of Twilight Capital, warned that the probable demise
of the South African economy spells disaster for Namibia and the entire region. “The strong reliance of Namibia on the SA economy means that the whole economic fallout to be experienced in SA will be felt almost instantly in Namibia.
The production stoppage in SA will lead to supply shock-induced inflation in SA, which will be transmitted to Namibia via the existing trade linkages,” he said.
“Prices in Namibia will more than double, given the weak production capacity on both essential and non-essential commodities.
Namibians will be pushed further into debt as they acquire new debts to finance inflated goods and services. The poor who have have no reserves to fall on will be severely affected, and this will exacerbate the already high poverty incidences.”
Likukela added that South Africa-based wholesalers and retail franchises in Namibia will need to scale down on their workforces due to supply disruptions from mother companies, and this will ultimately lead to retrenchments.
“The already elevated unemployment in Namibia will worsen and put a strain on the already under- pressure economy.
The situation in SA will compromise the fight against Covid, as essential medical supplies from SA will de delayed or will not find their way into Namibia,” he predicted.
Tega Shiimi-Ya-Shiimi, MD at Sanlam Investments, observed that South Africa is not just faced with a struggling economy that’s further being impacted by a devastating pandemic, but is now faced with a situation where the social contract, political ideologies, independence of the judiciary and economic fundamentals are at conflicting crossroads.
“The virtuous cycle for growth and prosperity is quickly turning into a vicious cycle, one that will be painful and will result in a long road to recovery. With Namibia being a largely dependent trading partner with South Africa, the knock-on impact will unfortunately be direct, which will further derail our recovery prospects of an already frail economy,” Shiimi Ya Shiimi told New Era yesterday.
Impact depends on duration
Omu Kakujaha-Matundu, senior economics lecturer at the University of Namibia, noted that it depends on how soon the South African government is going to contain the violence and looting.
“If contained sooner, then the impact on Namibia could be minimal. The main impact could be in terms of supply chain disruptions; that could impact prices of imported necessities. Prices could go up, and compounded by our own Covid-19 restrictions, could lead to more pain for the Namibian consumer. Any slowing down in economic activity could impact the broader Namibian economy, which is already bleeding adversely,” he said.
Another negative spillover he expects is negative investor sentiment in the region. “If the economic mainstay can be wiped out overnight, then I wonder who would want to bring their money here. The downward pressure on the Rand could make our importation and Covid-19 vaccines more expensive. One hopes that the violence will stop soonest. On a more positive note, this is another wake-up call for Namibian policymakers not to sleep on the job. Stop paying lip service to SME support, and support SMEs in the manufacturing of goods and provision of services in earnest,” Kakujaha-Matundu stated.
“It will definitely have an impact,” said Lameck Odada from the Accounting, Economics and Finance faculty at the Namibia University of Science and Technology (NUST).
“Namibia imports approximately 80% of goods from South Africa. If this continues, the likes of Food Lover’s Market will not have food on the shelves, and as a result will hike prices. Some Namibians also work in SA, and are unable to go to work and may not be paid a salary. The ripple effect of these cowardly acts of anarchy could bring political instability in SADC,” Odada warned.
Economic analyst Klaus Schade concurs that the immediate impact of the unrest depends on its duration, saying; “Since it affects Durban, South Africa’s main port, it can delay imports destined for Namibia. The same applies for supplies sourced from South Africa’s commercial hub - the Gauteng province.
The Namibia dollar has weakened since the beginning of this week against major currencies such as the US dollar, and dropped to the lowest level since the middle of April as the Rand tumbled more than 2% on Monday. This was after the SA government deployed soldiers on the streets to quell the violence that has left at least 30 people dead and more than 700 arrested after former President Jacob Zuma was sentenced to 15 months in prison for contempt of court after defying a corruption investigation. The Rand slipped as much as 2.2% to 14.5025 against the dollar, close to a two-month weak point it touched in early July.
“The unrest has certainly contributed to the depreciation. If it continues, it will result in upward price pressure for goods priced in US dollars, such as oil,” Schade stated.
He added that these latest riots are most likely not the last unrests in SA and point to political tensions, including within the ruling party, and at social and economic challenges that create uncertainties about the direction the country will take.
“These uncertainties are not conducive for domestic and foreign direct investment that is needed to create jobs and income. Since SA is the economic powerhouse in the region and beyond, these challenges can influence investor sentiments about the region in particular in combination with the instability affecting the Cabo Delgado region in Mozambique that is drawing in forces from the SADC region,” continued Schade.
South African president Cyril Ramaphosa announced late Monday that he was dispatching troops to help overwhelmed police halt the unrest and “restore order.”
Besides supply shortages, experts also predict that Namibia may experience a suppression of travel appetite from its main source, the SA market, especially now in the winter months, which usually is a popular travel time for South Africans.
The Hospitality Association of Namibia’s CEO Gitta Paetzold yesterday said the situation is very worrying because of the proximity of and close links Namibia has to South Africa.
Furthermore, she feels the image of southern Africa may be tarnished as global travel generally views a region when determining safety, and political unrest in a neighbouring country, especially when it’s an important and big country like SA, is bound to negatively influence the perception travellers have on the entire region. “We can only hope that SA can address the issues promptly,” she added.
Meanwhile, Namibia Tourism Board (NBT) CEO Digu //Naobeb said it is premature to yet assess the impact on the Namibian tourism industry due to ongoing protests in some parts of South Africa, but he hopes law enforcement agencies and the government are able to contain it.
“Thus, we are just hopeful that this will not have an overflow effect to Namibia for now. But on a whole, the action portrays a negative image on southern Africa as many international tourists have no geographical sense that SADC countries are not so interwoven in relation to their locations,”//Naobeb reacted.
Political commentator Ndumba Kamwanyah maintained that an unrest of any kind in South Africa is bound to be negatively felt here because the economic and social ties are intimately linked.
“We almost import most of our essential services and products from that country, including agricultural products, food, financial services, medical supplies and educational services,” he said.
In this time of the Covid-19 pandemic, Kamwanyah indicated that the looting and violence being seen in some parts of South Africa should make Namibia more concerned because it definitely will affect Namibia’s Covid-19 response.
“Of further concern is also the reality that those protests seem to be transforming from being a free- Zuma orientation to socio-economic issues - such as unemployment and poverty - something that could easily spill over to other SADC countries, deepening the unrest further for the region,” he stressed.
Vicious cycle… A suspected looter wheels a trolley with goods on Queen Nandi Drive in a commercial hub of Durban yesterday.